Talking to ET Now, Puneet Dalmia, MD, Dalmia Cement (Bharat), said that demonetisation has less impact on company's performance adding that the real impact on the cement sector will be visible during Jan-March quarter. Edited excerpt:

Everybody believes that as the impact would have been on autos and select other consumer staples cement demand, cement receivables would also have gotten impacted. How has the month of November been for you?So, we really have not seen much of an impact in terms of either demand or receivables at an overall company level. In fact, demand has been quite strong and receivables are actually better than normal. So one of the reasons why we feel this is the case is because may be people want to use all the cash that they have to deposit it and clear their receivables or whatever it is. However, we have seen some impact in states like Bihar where banking penetration is very poor and there is a lot of demand is rural demand there has been some drop and even in Bengal. So while the overall numbers look good I think there are regional pockets where we can see some drop in demand. Also our view is that November-December may not be the preview months to extrapolate what is going to happen in the sector because I feel that when a person is building a house he has already planned for the investment and he already has a budget in place only then he starts construction and typically you do not want to leave a house half built and then stop construction or stop repair work. So I think the mix of existing construction versus new construction is not very clear to us at this moment and I think we will get a better picture of what is the real impact of demonetisation in the Jan to March quarter. The November number should not be extrapolated into the future to feel the real impact of demonetisation. But overall I think so far we have not seen a big impact at an overall level though we have seen some impact where there is a high rural and a high cash economy with low banking penetration.

Most analyst on the street are a little confuse as to how to really approach cement as a sector and the stocks thereof I mean should they look at the real estate slowdown or should they look at the eventual push that the government is going to make into infrastructure what is your take on both the scenarios?I think that is a great question there is a interplay of factors which will be positive and negative and we will see how this eventually plays out clearly in some cities where there is a high real estate component and there are builders we will see some slowdown. But as interest rates fall, I think housing demand can be expected to grow very fast. Also the government push on infrastructure just because they have more fiscal room and in a low inflation environment there is more ability to use the balance sheet to really build infrastructure I think these two factors are very positive that housing demand might grow as interest rates fall and government may use its balance sheet to spur infrastructure. But there will be some negative from the real estate sector but overall my view is that in the short term, we have to see how this plays out in the Jan to March quarter and may be one more quarter, but I think three to six months from now, I personally feel that the situation will be very good. Overall, the whole demonetisation exercise will be much better for the sector. It will also allow collections to be faster and more visible in the rural economy as the rural economy gets fully integrated into the banking system. Also, I think in long term, the whole economy should grow even though there may be some short-term contraction as the logistics of printing new notes and replacing old currency gets fully sorted out. I am personally very positive six months from now but there may be a play of these positive and negative factors in the shorts term and I am not very clear exactly how they will play out in the short term.

Do you foresee energy cost for the sector at large to rise over the course of the next 12 months and what is the kind of impact that it could have on operational margins for example?Look, fuel costs are going up. Both coal prices and petroleum coke price have gone up pretty sharply in the last six to nine months. I mean they have literally tripled from the low that we saw earlier and that is going to cause margin compression eventually or it is going to create a cost impact. However, we were quite hopeful that GST is a very big positive for this sector and now that is a little bit uncertain in terms of timelines. Let us see how all the states react and whether the timeline of April can be adhered to. So I personally think in the short term, fuel costs are going up and that is definitely going to impact cost. And usually the Jan to March quarter is a good quarter in terms of demand and if demand plays out well, I think maybe we will be able to pass on these increases to the customers but if the demand situation is not that great, maybe we will have to take some hit in margins. So I think again in the short term, I am little cautious. Let us see how the factors that impact demand play out. Clearly, there is an impact on cost due to fuel. Whether we will be able to pass it on or not again remains to be seen based on demand.

You also undertook a major restructuring exercise recently with plans to merge two of your listed entities. Explain to us the merger rationale, what kind of synergies do you expect to play out and when do you expect the merger is going to complete.The main rationale behind the restructuring was that we wanted to have one listed entity and one large cement entity. So right now, we have Dalmia Bharat and OCL which are both listed. And the restructuring will simplify the corporate structure and basically create one listed stock for people to take a call on and it will create one large cement company. The second thing is that I think even though OCL was a subsidiary for the last one year and there has been a process of extracting synergies and leveraging it, I think creating one company will make this whole process of realising synergy is much faster and I think it is going to bring our cost down. It is definitely going to bring administrative costs down. It is going to bring overheads down. So I think we can realise the synergies much quicker and we expect lower cost structure with this restructuring. And I think over the long term even the brands are getting unified. So our ability to put different brands at different price points in one market without incurring transfer pricing issues will also be much better. So I think overall the whole integration into one company simplifies the operational management as well as simplifies our presentation to investors. So overall our feeling is that this is something that we had always promised the markets. It was work in process for the last one year and we thought that the timing was right to do it now. In terms of the time to consummate this transaction, I think we have to go through all the regulatory approvals, shareholder approvals, etc, and our view is that within four to six months it should get consummated.